Over the last 12 months i’ve spoken to many VCs, corporates and entrepreneurs about corporate innovation. I gathered my talking points and thought i’d summarize them in a post:
Corporate Innovation Done Right
If your company is working in a high barrier, highly specialized industry and has a specific area they want to focus on – consider a corporate incubator.
If you want to broadly look at what’s out there and can potentially disrupt your business or if your operating in a low barrier to entry environment such as software or security – you might want to consider tapping into the startup community.
Transportation and banking are examples of industries where incumbents have changed their approach following the reduction in barriers; Citi, Wells Fargo, BMW, Totoya and HSBC have all established CVCs and corporate accelerators to tap into the startup community.
Corporates often think their biggest asset is their capital or access to resources. Wrong ! Their biggest asset are their customers. Every entrepreneur will tell you that getting her first customer was way more challenging than raising funds. The umbrella or a large corporate can reduce risk and convince clients to take a leap of faith in a company with no refernece clients.
I’ve spoken to dozens of corporate accelerators. Every few bring value. Most are innovation theaters. They offer a venue the executives can visit, spend a few hours tasting a glimpse of innovation and go back to their daily tasks. Few startups i spoke to mentioned attending a corporate accelerator as a valuable experience.
Whether you plan to establish a corporate accelerator or a Corporate VC – Hire outside people. It’s a closed network and hiring people from within can significantly reduce the learning curve. They will have access to the right opportunities and find a way to personally bring value. A corporate VC (CVC) is a good yet expensive way to tap into the startup ecosystem. Unless you are Google, Intel or SalesForce, funds will be your tax to “play” in the ecosystem. I’ve written quite a few posts about CVCs, the investment decision process etc.
I started four new businesses inside companies so this comes from personal experience: I’ve see more than a few companies form internal incubators with 30-40 employees. While these are great retention tools and something to talk about during “all-hands” meetings, it rarely creates a new business. The skills required to start a new business are different than the skills required to come up with an idea. By nature entrepreneurs don’t work in large corporations and if you are lucky there might be a few folks (4-5) that for one reason or another decided to stay. If you start a corporate incubator have specific needs you want to target. Carefully vet the right employees or hire successful entrepreneurs with domain expertise. Separate the team from the company for a period long enough to get somewhere (6-12 months). No mandatory corporate meetings, no shared P&Ls etc.